New Technology Adoption and Industry Operations Analysis for Smart Manufacturing

Summary

A significant portion of the manufacturing research in NIST’s Engineering Laboratory (EL) focuses on facilitating efficiency improvements in the production and delivery of finished goods. The costs of producing goods are distributed such that a small number of costs represent a large proportion of the total. Therefore, new EL projects, along with other publicly supported research in manufacturing, that result in efficiency improvements can have disproportional impacts on manufacturing costs, if focused on high resource use (cost) processes. Currently, there is limited understanding among manufacturing researchers concerning economy wide supply chain costs for US manufacturing, which is necessary to improve US manufacturing efficiency. This project will examine industry operations by categorizing and estimating the costs and resource consumption that occurs throughout the manufacturing supply chain. This analysis differs from many other widely distributed manufacturing reports in that it: 1) provides representative manufacturing costs that can be compared throughout the supply chain; 2) estimates the associated non-manufacturing goods and services; 3) decomposes costs into hundreds of categories; 5) estimates the value of capital used; and 4) measures the manufacturing flow time. In addition to this effort, this project will study barriers to new technology adoption in manufacturing as well as identify methods for economic decision making in the adoption of new technologies. Currently, there is limited knowledge among some manufacturers concerning economic evaluation methods necessary for evaluating the adoption of new production technologies. New production technologies are a significant source of efficiency improvement for manufacturing (e.g., the adoption of computer aided drawing and computer aided manufacturing). Small and medium sized manufacturers, however, are often reluctant to adopt new technologies due to uncertainty in assessing the overall advantage of adoption. Standards and guides to economic decision making provide more clarity in making this assessment.

Description

Objective:  Facilitate advancements in manufacturing efficiency by identifying barriers to technology adoption in manufacturing, identifying methodologies for analyzing the costs and benefits of technology adoption, and developing methodologies for tracking industry operations activity.

Technical Idea:  This research is comprised of two topic areas:

(1) Tracking industry operations activity: The costs and environmental impacts of manufacturing activity will be tracked throughout the supply chain.

Currently, industry data and reports do not decompose manufacturing costs such that public entities can compare costs in the supply chain and identify those costs that represent a disproportional amount of the total. Public entities have a significant role in the US innovation system. The federal government has had a substantial impact in developing, supporting, and disseminating numerous innovations and industries, including the Internet, telecommunications, aerospace, semiconductors, computers, pharmaceuticals, and nuclear power, many of which may not have come to fruition without public support. Public entities have scarce resources, therefore, they must prioritize their investments in developing and disseminating innovative solutions to improve efficiency in production by focusing on those cost areas that have a disproportional impact. Companies often do this naturally by examining their accounting books and concentrating on their largest costs rather than their smallest ones. Automakers, for example, might be more concerned with developing innovative solutions that reduce the total cost of steel for a car than the cost of fabric for the interior. Similar benefits can be realized by applying such approaches at the economy wide scale; however, there is limited evidence that this type of approach is currently being applied. For public entities, identifying large costs requires economy-wide analysis and there is limited research and literature focusing on this topic. This project examines industry operations by combining a number of methods from varying fields of study, resulting in an analysis of costs throughout the supply chain, including an analysis of flow time. The decomposition of industry operations that results from this project can provide insight leading to new EL projects having greater impact than might otherwise have occurred.

(2) New technology and standards adoption in manufacturing: This project will study new technology adoption and diffusion in manufacturing, including methods for facilitating new technology adoption and methods for analyzing the costs and benefits of new technology adoption.

Due to the complexity and changing nature of industry activity, there are challenges in understanding the adoption of new manufacturing technologies such as those that reduce the consumption of resources. The diffusion of new technologies or innovations has a significant impact on the success of an industry and is studied in several disciplines, including economics, communications, sociology, and marketing. Innovations can be stymied by perception, quality, information dissemination, social systems, change agents, and profitability. In order to accelerate new technology adoption, it is necessary to understand the barriers to adoption. Small and medium sized manufacturers are often reluctant to adopt new technologies due to uncertainty in assessing the overall advantage of adoption. This project will study new technology adoption and diffusion in manufacturing, including the impact of accelerating technology adoption. As part of this effort, a method for analyzing the costs and benefits of a new technology will be identified so that small and medium manufacturers can more easily assess the advantages of adoption.

Research Plan:  

Industry Operations Analysis: The industry operations analysis part of this project uses economic input-output modeling to systematically examine the supply chain for particular products. This model is expanded by using environmentally extended input-output data along with other industry data such as that on capital investments. Additionally, the inter-industry data found in these models allows one to map the supply chain. Combining this map with data from the Economic Census, one can estimate the flow time for a product and break out categories for material goods inventories, work-in-process, and finished goods inventory. The project contains five components:

1. Estimate costs consumed in production using input-output analysis
2. Estimate the consumption of resources using environmentally extended input-output data
3. Estimate the flow time from raw material extraction to the finished product
4. Estimate capital consumption
5. Combine the four previous factors to identify areas of high resource consumption

The results of these analyses is a systematic examination of the costs and resources consumed in the supply chain for products made in the US. The results inform those in EL and other public entities on the cost structure of US manufactured goods and identifies those costs that represent a disproportional amount of the total. The cost categories are not double counted, an issue that frequently occurs in other approaches, and can be compared to the other costs throughout the supply chain in order to identify the costs that represent a disproportional amount of the total. It estimates the non-manufacturing goods and services that contribute to manufactured goods and decomposes costs into hundreds of standard categories, including items consumed in production and long-term capital investments. Uncertainties in the data will be examined in a sensitivity analysis utilizing Monte Carlo simulation.

The results of the industry operations analysis will be reported out through five primary communication platforms: 1) the Annual Manufacturing Review that provides a basic synopsis of the manufacturing industry and its supply chain; 2) periodic NIST reports that describe basic methods; 3) peer reviewed journal articles that describe methods in detail and apply them to specific case studies; 4) conference proceedings; and 5) NIST seminars.

New Technology Adoption: The research plan for examining new technology adoption includes conducting a literature search on the barriers to new technology adoption and on the methods for economic decision making in the adoption of new technologies in manufacturing. The methods that are identified and/or developed will be documented in a series of NIST reports.

Major Accomplishments

Outcomes

• NIST Special Publication 1142: The Current State and Recent Trends of the US Manufacturing Industry
• NIST Special Publication 1176: Costs and Cost Effectiveness of Additive Manufacturing
• NIST Technical Note 1810: The US Manufacturing Value Chain: An International Perspective